What happens at a company's break-even point? How can you compute the break-even point for a company? How can a change in costs for a product or service be incorporated into the break-even calculation?

If a company's break-even point is 10,000 units, then once the company sells 10,000, they will make no profit and no loss. For every additional unit sold above 10,000, they will make a profit.


To compute the break-even point for a company:

Sales – Variable Costs = Contribution Margin

Contribution Margin – Fixed Costs = Net Income (which should be 0 to calculate the break-even point)

Break even point = Fixed Costs / contribution * sales.

Break even qty = Fixed costs / contribution per unit.

Break Even is a point where a business is in a position of no profit, no loss situation
one can ascertain break even graphically i.e. intersection of your total revenue curve and total cost curve

in cost accounting we calculate that as = Fixed cost / P V ratio or Contribution margin ratio

where P/v ratio is: contribution / sales

Theroritically one can say that break even point is a point where a business can recover its fixed cost and nothing else. After that wr a business earns can be recognised as profit subject to variable cost which does not affect the above formula as we are already taking contribution which ultimately is the diffrence between Sales and Variable cost.